Gross Margin of 37.2% Exceeds Upper End of
Guidance, Contributing to Record Net Income and EPS - Both GAAP and
Non-GAAP
Diodes Incorporated (Nasdaq: DIOD) today reported its financial
results for the first quarter ended March 31, 2019.
First Quarter Highlights
- Revenue was $302.3 million, an increase
of 10.1 percent from the $274.5 million in the first quarter 2018
due to continued market share gains and a decrease of 3.9 percent
from the $314.4 million in the fourth quarter 2018;
- GAAP gross profit was $112.4 million,
compared to $98.6 million in the first quarter 2018 and $114.2
million in the fourth quarter 2018;
- GAAP gross profit margin was 37.2
percent, compared to 35.9 percent in the first quarter 2018 and
36.3 percent in the fourth quarter 2018;
- GAAP net income was a record $31.7
million, or $0.62 per diluted share, compared to GAAP net income of
$18.5 million, or $0.37 per diluted share, in the first quarter
2018 and GAAP net income of $29.5 million, or $0.58 per diluted
share, in the fourth quarter 2018;
- Non-GAAP adjusted net income was a
record $35.4 million, or $0.69 per diluted share, compared to $24.2
million, or $0.48 per diluted share, in the first quarter 2018 and
$33.2 million, or $0.65 per diluted share, in the fourth quarter
2018;
- Excluding $3.5 million, net of tax, of
non-cash share-based compensation expense, both GAAP and non-GAAP
earnings per share would have increased by $0.07 per diluted
share;
- EBITDA was $69.9 million, or 23.1
percent of revenue, compared to $54.2 million, or 19.7 percent of
revenue, in the first quarter 2018 and $70.5 million, or 22.4
percent of revenue, in the fourth quarter 2018; and
- Achieved cash flow from operations of
$69.9 million and $51.2 million free cash flow, including $18.6
million of capital expenditures. Net cash flow was a positive $60.5
million.
Commenting on the results, Dr. Keh-Shew Lu, President and Chief
Executive Officer, stated, “Diodes once again had an exceptional
quarter of solid financial results with increasing profitability.
Revenue for the quarter grew 10% over the prior year period on
continued market share gains and was down 3.9% sequentially, which
was better than typical seasonality. Notably, gross margin
increased 90 basis points from the fourth quarter 2018, exceeding
the upper end of our guidance range and reaching the highest level
since the fourth quarter of 2010, and we expect a further increase
in the second quarter. Contributing to this margin expansion was
the achievement of record revenue in Europe combined with record
revenue in the automotive and industrial end markets. Specifically
in the automotive market, revenue grew 7% sequentially and 23%
year-over-year as we continued to benefit from past design win
activity. Together, these two end markets represented 39% of total
revenue, which places us well on track to achieve our long-term
target of 40%. Additionally, our Pericom business, excluding
frequency control products, reached record revenue levels in the
first quarter and contributed to our strong margin performance.
“More recently, on April 1st we announced the closing of the
transaction to acquire Texas Instruments’ (TI) wafer fabrication
facility and operation located in Greenock, Scotland (GFAB). The
ownership transfer has gone very smooth with no interruption to
production. We are in the process of aggressively installing
Diodes’ processes to fully utilize the additional 8” capacity and
capability of the fab, which will support our growth expansion
initiatives and future cost reductions. As part of a five-year
wafer supply agreement, Diodes is providing foundry services to TI,
which is not material to Diodes overall revenue.”
Dr. Lu concluded, “As we look to the second quarter, we expect
to extend our growth momentum and market share gains, while further
increasing gross margin and lowering operating expenses as a
percentage of revenue. Together, these factors will contribute to
driving higher profitability and cash flow for Diodes and our
shareholders.”
First Quarter 2019
Revenue for first quarter 2019 was $302.3 million, an increase
of 10.1 percent from $274.5 million in first quarter 2018 and a
decrease of 3.9 percent from $314.4 million in the fourth quarter
2018, which was better than typical seasonality.
GAAP gross profit for the first quarter 2019 was $112.4 million,
or 37.2 percent of revenue, compared to the first quarter 2018 of
$98.6 million, or 35.9 percent of revenue, and the fourth quarter
2018 of $114.2 million, or 36.3 percent of revenue. The 90-basis
point sequential increase was primarily due to higher revenue
contribution from the automotive and industrial markets as well as
Pericom products.
GAAP operating expenses for first quarter 2019 were $70.3
million, or 23.3 percent of revenue, and $65.8 million, or 21.8
percent of revenue, on a non-GAAP basis, which excluded $4.5
million of amortization of acquisition-related intangible asset
expenses. GAAP operating expenses in the first quarter 2018 were
$71.7 million, or 26.1 percent of revenue, and in the fourth
quarter 2018 were $70.3 million, or 22.4 percent of revenue.
First quarter 2019 GAAP net income was a record $31.7 million,
or $0.62 per diluted share, compared to GAAP net income of $18.5
million, or $0.37 per share, in first quarter 2018 and GAAP net
income of $29.5 million, or $0.58 per diluted share, in fourth
quarter 2018.
First quarter 2019 non-GAAP adjusted net income was a record
$35.4 million, or $0.69 per diluted share, which excluded, net of
tax, $3.7 million of non-cash acquisition-related intangible asset
amortization costs. This compares to non-GAAP adjusted net income
of $24.2 million, or $0.48 per diluted share, in the first quarter
2018 and $33.2 million, or $0.65 per diluted share, in the fourth
quarter 2018.
The following is an unaudited summary reconciliation of GAAP net
income to non-GAAP adjusted net income and per share data, net of
tax (in thousands, except per share data):
Three Months Ended March 31,
2019 GAAP net income $ 31,716
GAAP diluted earnings per share $ 0.62
Adjustments to reconcile net income to non-GAAP net income:
Amortization of acquisition-related intangible assets
3,674 Non-GAAP net income $
35,390 Non-GAAP diluted earnings per share
$ 0.69 Note: Throughout this release, we refer
to “net income attributable to common stockholders” as “net
income.”
(See the reconciliation tables of GAAP net income to non-GAAP
adjusted net income near the end of this release for further
details.)
Included in first quarter 2019 GAAP net income and non-GAAP
adjusted net income was approximately $3.5 million, net of tax, of
non-cash share-based compensation expense. Excluding share-based
compensation expense, both GAAP earnings per share (“EPS”) and
non-GAAP adjusted EPS would have increased by $0.07 per diluted
share for first quarter 2019, $0.10 for first quarter 2018 and
$0.07 for fourth quarter 2018.
EBITDA (a non-GAAP measure), which represents earnings before
net interest expense, income tax, depreciation and amortization, in
the first quarter 2019 was $69.9 million, or 23.1 percent of
revenue, compared to $54.2 million, or 19.7 percent of revenue, in
the first quarter 2018 and $70.5 million, or 22.4 percent of
revenue, in the fourth quarter 2018. For a reconciliation of GAAP
net income to EBITDA, see the table near the end of this release
for further details.
For first quarter 2019, net cash provided by operating
activities was $69.9 million. Net cash flow was a positive $60.5
million, and free cash flow (a non-GAAP measure) was $51.2 million,
which includes $18.6 million of capital expenditures.
Balance Sheet
As of March 31, 2019, the Company had approximately $308 million
in cash, cash equivalents and short-term investments, long-term
debt (including the current portion) totaled approximately $216
million, and working capital was approximately $525 million.
The results announced today are preliminary and unaudited, as
they are subject to the Company finalizing its closing procedures
and customary quarterly review by the Company's independent
registered public accounting firm. As such, these results are
subject to revision until the Company files its Form 10-Q for the
quarter ending March 31, 2019.
Business Outlook
Dr. Lu concluded, “We expect revenue in second quarter of 2019
to increase to approximately $322 million, plus or minus 2.0
percent. At the mid-point, this represents growth of 6.5 percent
sequentially and up 5.9 percent over the prior year period, and
reflects continued growth from Diodes organic business as well as
revenue contribution from GFAB. We expect GAAP gross margin to be
38.0 percent, plus or minus 1 percent. Non-GAAP operating expenses,
which are GAAP operating expenses adjusted for amortization of
acquisition-related intangible assets, are expected to be
approximately 21 percent of revenue, plus or minus 1 percent. We
expect net interest expense to be approximately $2.0 million. Our
income tax rate is expected to be 24.5 percent, plus or minus 3
percent, and shares used to calculate diluted EPS for the second
quarter are anticipated to be approximately 52 million.”
Purchase accounting adjustments related to amortization of
acquisition-related intangible assets of $3.7 million, after tax,
for Pericom and previous acquisitions are not included in these
non-GAAP estimates.
Conference Call
Diodes will host a conference call on Tuesday, May 7, 2019, at
4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss its
first quarter 2019 financial results. Investors and analysts may
join the conference call by dialing 1-855-232-8957 and
providing the confirmation code 8919166. International
callers may join the teleconference by dialing +1-315-625-6979 and
entering the same confirmation code at the prompt. A telephone
replay of the call will be made available approximately two hours
after the call and will remain available until May 14, 2019 at
midnight Central Time. The replay number is 1-855-859-2056 with a
pass code of 8919166. International callers should dial
+1-404-537-3406 and enter the same pass code at the prompt.
Additionally, this conference call will be broadcast live over the
Internet and can be accessed by all interested parties on the
Investors’ section of Diodes' website
at http://www.diodes.com. To listen to the live call, please
go to the investors’ section of Diodes’ website and click on the
conference call link at least 15 minutes prior to the start of the
call to register, download and install any necessary audio
software. For those unable to participate during the live
broadcast, a replay will be available shortly after the call on
Diodes' website for approximately 90 days.
About Diodes Incorporated
Diodes Incorporated (Nasdaq: DIOD), a Standard and Poor’s
SmallCap 600 and Russell 3000 Index company, is a leading global
manufacturer and supplier of high-quality application-specific
standard products within the broad discrete, logic, analog, and
mixed-signal semiconductor markets. Diodes serves the consumer
electronics, computing, communications, industrial, and automotive
markets. Diodes’ products include diodes, rectifiers, transistors,
MOSFETs, protection devices, function-specific arrays, single gate
logic, amplifiers and comparators, Hall-effect and temperature
sensors, power management devices, including LED drivers, AC-DC
converters and controllers, DC-DC switching and linear voltage
regulators, and voltage references along with special function
devices, such as USB power switches, load switches, voltage
supervisors, and motor controllers. Diodes also has timing,
connectivity, switching, and signal integrity solutions for
high-speed signals. Diodes’ corporate headquarters and Americas’
sales office are located in Plano, Texas and Milpitas, California.
Design, marketing, and engineering centers are located in Plano;
Milpitas; Taipei, Taiwan; Taoyuan City, Taiwan; Zhubei City,
Taiwan; Oldham, England; and Neuhaus, Germany. Diodes’ wafer
fabrication facilities are located in Oldham and Greenock, Scotland
and Shanghai, China. Diodes has assembly and test facilities
located in Shanghai, Jinan, Chengdu, and Yangzhou, China, as well
as in Hong Kong, Neuhaus, and Taipei. Additional engineering,
sales, warehouse, and logistics offices are located in Taipei; Hong
Kong; Manchester; Shanghai; Shenzhen, China; Seongnam-si, South
Korea; Munich, Germany; and Tokyo, Japan, with support offices
throughout the world.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995: Any statements set forth above that are not
historical facts are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such
statements include statements containing forward-looking words such
as “expect,” “anticipate,” “aim,” “estimate,” and variations
thereof, including without limitation statements, whether direct or
implied, regarding expectations of revenue growth, market share
gains, increase in gross margin and increase in gross profits in
2019 and beyond; that for the second quarter of 2019, we expect
revenue to be approximately $322 million plus or minus 2.0 percent;
we expect GAAP gross margin to be 38.0 percent, plus or minus 1
percent; non-GAAP operating expenses, which are GAAP operating
expenses adjusted for amortization of acquisition-related
intangible assets, are expected to be approximately 21.0 percent of
revenue, plus or minus 1 percent; we expect net interest expense to
be approximately $2 million; we expect tax rate to be 24.5 percent,
plus or minus 3 percent; shares used to calculate diluted EPS for
the first quarter are anticipated to be approximately 52.0 million;
purchase accounting adjustments for Pericom and previous
acquisitions of $3.7 million after tax are not included in these
non-GAAP estimates; we expect GFAB to not only add to our existing
global footprint, but also provide expanded wafer capacity to
support our product group, in particular for the automotive market;
and other statements identified by words such as “estimates,”
“expects,” “projects,” “plans,” “will,” and similar expressions.
Potential risks and uncertainties include, but are not limited to,
such factors as: the risk that such expectations may not be met;
the risk that the expected benefits of acquisitions may not be
realized or that integration of acquired businesses may not
continue as rapidly as we anticipate; the risk that the pending
acquisition of GFAB will not close successfully (due to failure to
obtain any required approvals or other reasons); the risk that we
may not be able to maintain our current growth strategy or continue
to maintain our current performance, costs, and loadings in our
manufacturing facilities; the risk that we may not be able to
increase our automotive, industrial, or other revenue and market
share; risks of domestic and foreign operations, including
excessive operating costs, labor shortages, higher tax rates, and
our joint venture prospects; the risk that we may not continue our
share repurchase program; the risks of cyclical downturns in the
semiconductor industry and of changes in end-market demand or
product mix that may affect gross margin or render inventory
obsolete; the risk of unfavorable currency exchange rates; the risk
that our future outlook or guidance may be incorrect; the risks of
global economic weakness or instability in global financial
markets; the risks of trade restrictions, tariffs, or embargoes;
the risk of breaches of our information technology systems; and
other information, including the “Risk Factors” detailed from time
to time in Diodes’ filings with the United States Securities and
Exchange Commission.
DIODES INCORPORATED AND SUBSIDIARIES CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended March 31, 2019
2018 Net sales $ 302,293
$ 274,512
Cost of goods sold 189,882
175,917 Gross profit 112,411 98,595
Operating
expenses Selling, general and administrative 43,688 47,150
Research and development 22,170 20,200 Amortization of acquisition
related intangible assets 4,484 4,767 Other operating (income)
expense (54 ) (462 ) Total operating expense
70,288 71,655
Income from
operations 42,123 26,940
Other income (expense)
Interest income 875 514 Interest expense (2,145 ) (2,757 ) Foreign
currency loss, net (64 ) (3,029 ) Other income 1,245
4,635 Total other expense (89 ) (637 )
Income before income taxes and noncontrolling interest
42,034 26,303 Income tax provision 10,298
7,783
Net income 31,736 18,520
Less net (income)
loss attributable to noncontrolling interest (20 )
6
Net income attributable to common
stockholders $ 31,716 $ 18,526
Earnings
per share attributable to common stockholders: Basic $ 0.63
$ 0.38 Diluted $ 0.62 $ 0.37
Number
of shares used in earnings per share computation: Basic
50,398 49,337 Diluted 51,462
50,622 Note: Throughout this release, we refer
to “net income attributable to common stockholders” as “net
income.”
DIODES INCORPORATED AND
SUBSIDIARIES RECONCILIATION OF NET INCOME TO ADJUSTED NET
INCOME
(in thousands, except per share data)
(unaudited)
For the three months
ended March 31, 2019:
OperatingExpenses
Income TaxProvision
Net Income Per-GAAP $ 31,716
Diluted earnings per share (Per-GAAP) $ 0.62
Adjustments to reconcile net income to non-GAAP net
income: Amortization of acquisition-related
intangible assets 4,484 810
3,674 Non-GAAP
$ 35,390 Diluted shares used in computing
earnings per share
51,462 Non-GAAP diluted
earnings per share $ 0.69 Note: Included
in GAAP and non-GAAP net income was approximately $3.5 million, net
of tax, non-cash share-based compensation expense. Excluding
share-based compensation expense, both GAAP and non-GAAP diluted
earnings per share would have improved by $0.07 per share.
DIODES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
– Cont.
(in thousands, except per share data)
(unaudited)
For the three months
ended March 31, 2018:
Operating
Expenses
Income TaxProvision
Net Income Per-GAAP $ 18,526
Earnings per share (Per-GAAP) Diluted
$
0.37 Adjustments to reconcile net income to
non-GAAP net income: M&A
Pericom 2,574 Amortization of
acquisition-related intangible assets 3,139 (565 )
KFAB (253 ) Restructuring (320 )
67
Others 3,342 Amortization of
acquisition-related intangible assets 1,628 (300 )
Officer retirement 2,550 (536 )
Non-GAAP
$ 24,189 Diluted shares used in
computing earnings per share
50,622
Non-GAAP earnings per share Diluted
$ 0.48
Note: Included in GAAP and non-GAAP net
income was approximately $5.0 million, net of tax, non-cash
share-based compensation expense. Excluding share-based
compensation expense, both GAAP and non-GAAP diluted earnings per
share would have improved by $0.10 per share.
ADJUSTED NET INCOME
AND ADJUSTED EARNINGS PER SHARE
The Company’s financial statements present net income and
earnings per share that are calculated using accounting principles
generally accepted in the United States (“GAAP”). The Company’s
management makes adjustments to the GAAP measures that it feels are
necessary to allow investors and other readers of the Company’s
financial releases to view the Company’s operating results as
viewed by the Company’s management, board of directors and research
analysts in the semiconductor industry. These non-GAAP measures are
not prepared in accordance with, and should not be considered
alternatives or necessarily superior to, GAAP financial data and
may be different from non-GAAP measures used by other companies.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies’ non-GAAP financial measures, even if they have similar
names. The explanation of the adjustments made in the table above,
are set forth below:
Detail of non-GAAP adjustments
Amortization of acquisition-related
intangible assets – The Company excluded this
item, including amortization of developed technologies and customer
relationships. The fair value of the acquisition-related intangible
assets, which was recognized through purchase accounting, is
amortized using straight-line methods which approximate the
proportion of future cash flows estimated to be generated each
period over the estimated useful life of the applicable assets. The
Company believes that exclusion of this item is appropriate because
a significant portion of the purchase price for its acquisitions
was allocated to the intangible assets that have short lives and
exclusion of the amortization expense allows comparisons of
operating results that are consistent over time for both the
Company’s newly acquired and long-held businesses. In addition, the
Company excluded this item because there is significant variability
and unpredictability among companies with respect to this
expense.
KFAB restructuring - The
Company has recorded restructuring charges related to the shutdown
and relocation of its wafer fabrication facility located in Lee’s
Summit, MO (“KFAB”). These restructuring charges are excluded from
management’s assessment of the Company’s operating performance. The
Company believes the exclusion of the restructuring charges
provides investors an enhanced view of the cost structure of the
Company’s operations and facilitates comparisons with the results
of other periods that may not reflect such charges or may reflect
different levels of such charges.
Officer retirement – In
2018, the Company excluded costs related to the retirement of two
executives. These costs represent cash payments and the accelerated
vesting of previously issued stock awards. The Company feels it is
appropriate to exclude these costs since they don’t represent
ongoing operating expenses and will present investors with a more
accurate indication of our continuing operations.
CASH FLOW
ITEMS
Free cash flow (FCF)
(Non-GAAP)
FCF for the first quarter of 2019 is a non-GAAP financial
measure, which is calculated by subtracting capital expenditures
from cash flow from operations. For the first quarter of 2019, FCF
was $51.2 million, which represents the cash and cash equivalents
that we are able to generate after taking into account cash outlays
required to maintain or expand property, plant and equipment. FCF
is important because it allows us to pursue opportunities to
develop new products, make acquisitions and reduce debt.
CONSOLIDATED
RECONCILIATION OF NET INCOME TO EBITDA
EBITDA represents earnings before net interest expense, income
tax provision, depreciation and amortization. Management believes
EBITDA is useful to investors because it is frequently used by
securities analysts, investors and other interested parties, such
as financial institutions in extending credit, in evaluating
companies in our industry and provides further clarity on our
profitability. In addition, management uses EBITDA, along with
other GAAP and non-GAAP measures, in evaluating our operating
performance compared to that of other companies in our industry.
The calculation of EBITDA generally eliminates the effects of
financing, operating in different income tax jurisdictions, and
accounting effects of capital spending, including the impact of our
asset base, which can differ depending on the book value of assets
and the accounting methods used to compute depreciation and
amortization expense. EBITDA is not a recognized measurement under
GAAP, and when analyzing our operating performance, investors
should use EBITDA in addition to, and not as an alternative for,
income from operations and net income, each as determined in
accordance with GAAP. Because not all companies use identical
calculations, our presentation of EBITDA may not be comparable to
similarly titled measures used by other companies. For example, our
EBITDA takes into account all net interest expense, income tax
provision, depreciation and amortization without taking into
account any amounts attributable to noncontrolling interest.
Furthermore, EBITDA is not intended to be a measure of free cash
flow for management’s discretionary use, as it does not consider
certain cash requirements such as tax and debt service
payments.
The following table provides a reconciliation of net income to
EBITDA (in thousands, unaudited):
Three Months Ended March 31,
2019 2018 Net income (per-GAAP) $
31,716 $ 18,526 Plus: Interest expense, net 1,270 2,243 Income tax
provision 10,298 7,783 Depreciation and amortization 26,641
25,610
EBITDA (non-GAAP) $ 69,925
$ 54,162 DIODES INCORPORATED AND
SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31, 2019
2018 (unaudited) (audited)
Assets Current assets: Cash and cash equivalents $ 301,167 $
241,053 Short-term investments 6,751 7,499
Accounts receivable, net of allowances of
$4,258 and $4,102 at March 31, 2019 and December 31, 2018,
respectively
215,229 228,405 Inventories 216,569 215,435 Prepaid expenses and
other 41,274 42,446 Total current
assets 780,990 734,838 Property, plant
and equipment, net 441,215 446,835 Deferred income tax 31,830
31,652 Goodwill 135,669 132,437 Intangible assets, net 133,506
137,935 Other 89,788 42,674 Total
assets $ 1,612,998 $ 1,526,371
Liabilities Current liabilities: Line of credit $ 12,330 $
10,254 Accounts payable 107,078 117,808 Accrued liabilities and
other 86,880 82,605 Income tax payable 21,452 15,744 Current
portion of long-term debt 28,403 27,613
Total current liabilities 256,143 254,024
Long-term debt, net of current portion 187,378 186,143
Deferred tax liabilities 18,003 17,993 Other long-term liabilities
134,176 90,779 Total liabilities
595,700 548,939 Commitments and
contingencies
Stockholders' equity
Preferred stock - par value $1.00 per
share; 1,000,000 shares authorized; no shares issued or
outstanding
— —
Common stock - par value $0.66 2/3 per
share; 70,000,000 shares authorized; 50,596,756 and 50,221,035,
issued and outstanding at March 31, 2019 and December 31, 2018,
respectively
34,704 34,454 Additional paid-in capital 410,163 399,915 Retained
earnings 668,424 636,708
Treasury stock, at cost, 1,457,206 shares
held at March 31, 2019 and December 31, 2018
(37,768 ) (37,768 ) Accumulated other comprehensive loss
(106,848 ) (101,846 ) Total stockholders' equity 968,675
931,463 Noncontrolling interest 48,623 45,969
Total equity 1,017,298 977,432
Total liabilities and stockholders' equity $ 1,612,998 $
1,526,371
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190507005942/en/
Company Contact:Diodes Inc.Laura MehrlDirector of
Investor RelationsP: 972-987-3959E: laura_mehrl@diodes.com
Investor Relations Contact:Shelton GroupLeanne
SieversPresident, Investor RelationsP: 949-224-3874E:
lsievers@sheltongroup.com
Diodes (NASDAQ:DIOD)
Historical Stock Chart
From Apr 2024 to May 2024
Diodes (NASDAQ:DIOD)
Historical Stock Chart
From May 2023 to May 2024